BlackBerry on defensive as profits drop by £118m in Q1

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Manufacturer’s share price plummets by 28 per cent as president and CEO Heins reveals Q1 financials

BlackBerry has appealed for calm after its profits fell by a staggering $178 million (£118 million) in just three months.

The Canadian manufacturer had appeared to be turning its recent run of poor results around, having posted profits of more than $94 million (£62 million) in Q4 ending March 1.

But this recovery was to be short-lived, with the company revealing on June 28 it made losses of $84 million (£56 million) in Q1 ending June 1.

Revenue was up by 15 per cent sequentially and nine per cent year on year to $3.1 billion (£2.03 billion). Despite the increase, the figure still fell below analysts’ expectations – they had forecast revenue of $3.37 billion (£2.25 billion).

The firm also revealed customer numbers have fallen by four million to 72 million during the period, taking total numbers lost in the past three quarters to eight million.

BlackBerry’s shares plummeted by more than 28 per cent to $10.46 (£6.97) as the New York Stock Exchange closed on the day the financial results were reported. It was the biggest drop in the manufacturer’s share price since 2000.

The company’s president and CEO Thorsten Heins (pictured), attempted to head off any negative reaction to its financial performance during a question-and-answer session conference call immediately after the results were released.

Heins insisted the roll-out of its new operating system, BlackBerry 10, is still in its very early stages and said it is too early to make a definitive judgement on its success or otherwise.

“It’s an ongoing effort,” said Heins. “I’m not looking at the short term, it’s a marathon and we are ready to run that marathon. We will do whatever it takes to make this successful but we will not sacrifice long-term success for short-term numbers.

“BlackBerry 10 is still in the early stages of its transition. In fact, we are only five months into what is the launch of an entirely new mobile computing platform. We are five months into our platform transformation that we anticipate will drive future smartphone devices, greater enterprise efficiency
and new mobile computing opportunities for many years to come.

“What is exciting is we are getting very comfortable with who we are as a company and where we will sit in the market. We don’t have to be all things to all people in all markets and embracing this focus allows us to drive efficiency, be flexible and agile, and, ultimately, drive best-in-class innovation.

“We’re continuing to focus on improving all areas of the business as we work towards our near-term objective of making BlackBerry a leading ecosystem and the number one in enterprise.”

‘Steady progress’
Heins also maintained that BlackBerry is making “steady progress” and insisted the firm is in a much stronger position than it found itself in this time last year and despite the apparent slow progress of the latest platform, the new products are being well received across the world.

BlackBerry 10 debuted on the Z10 smartphone at the end of January and two QWERTY-based handsets have followed since then – the Q10 in April and the Q5 at the start of this month.

The manufacturer is expected to release a further three BlackBerry 10 devices before the end of the year and at least one non-BB10 device.

BlackBerry shipped 6.8 million smartphones in the quarter, up 13 per cent sequentially. Of these 40 per cent, or 2.72 million, were BlackBerry 10 devices, up from the one million units the manufacturer shipped in Q4.

Global take-up of the BB10 devices has been positive, Heins said, and he revealed BB10 handsets are now available in 147 countries in total. The Q10 is now on sale in 96 countries, with an additional 50 countries expected to launch in BlackBerry’s second quarter. The Q5 has been accepted by 149 carriers so far, with 106 of these in 59 countries expected to launch before the start of September.

BlackBerry is also continuing to increase its marketing investment to ensure the new products penetrate the market, Heins added.

He said: “We have made a lot of steady progress in the past year. Today, we are a leaner and more efficient company. A year ago, none of these products existed.

They are being well received because of the performance and quality of BlackBerry 10.

“We are doing things right and doing what we said we would do. There’s a lot of work to be done, lots of new products to be built and launched, and lots of marketing campaigns to be generated for those products. This is a very competitive market and you have to be on your toes all the time to perform, and that’s what we are doing.

“All of these are very exciting growth initiatives. We will invest in them, drive them hard and eventually see the value in them. It’s important we get the platform out there, get it penetrated and then build on it with a combination of BB10, BES 10 and cross-platform BBM. From this perspective, I’m confident in the future of BlackBerry 10.”

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